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Phuket business: Skyscrapers and economic woe

Legacy Phuket Gazette

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Phuket business: Skyscrapers and economic woe | The Thaiger

PHUKET: There’s an economic-cycle theory based on the link between the building of skyscrapers and economic strife. Guess what it’s called? Correct: the Skyscraper Index.

While many trends and theories these days are based on cycles, this economical theory is based on the completion of skyscrapers. So what is this theory and does it have any credibility?

Let’s first unravel the theory and then you can make up your own minds.

A tall index: Barclays recently published the new Skyscraper Index which shows there is an unhealthy correlation between the construction of the world’s next tallest building and an impending financial crisis. Sounds far-fetched, and is there any evidence to support this theory? All we can do is look at the historical time that Barclays is drawing this information from.

1873-1878 The long depression: The United States economic recession with bank failures that came to be known as the “Long Depression” coincided with the construction of the Equitable Life Building in 1873. At the time the building was the first skyscraper at a height of 142 feet.

1890, British banking crisis and world recession: The 309-foot New York World building, also known as the Pulitzer building and Chicago’s 269-foot Auditorium completed in 1889, coincided with the British banking crisis of 1890, and a world recession.

1893, US panic marked by the collapse of railroad over-building: The building of Chicago’s 302-foot Masonic Temple; the 348-foot Manhattan Life Building; and the 353-foot Milwaukee City Hall, coincided with the collapse of railroad overbuilding. It also coincided with a string of bank failures and a run on gold.

Still don’t see the link? Let’s look at some more recent examples.

1973-1975, US and world economic crisis: The 1972 construction of One World Trade Center; the 1973 completion of Two World Trade Center; and the 1974 construction of the Sears Tower in Chicago, coincided with a period of speculation in monetary expansion from foreign lending. It also coincided with the collapse of the Bretton Woods system, a rise in oil prices which caused a global economic crisis, and speculation in stocks, property, ships and aircraft.

1997-1998, Asian economic crisis: The Asian economic crisis, currency devaluation and speculation in stock and property, coincided with the completion of the Petronas Towers in 1997. The 1,483-foot Petronas Towers were the tallest buildings in the world, but also heralded the start of the Asian financial crash.

2000-2003, Dot com bubble: The construction of the 1,671-foot Taipei 101 skyscraper began in 1999 and was completed in 2004. The duration coincided with the recession in the early 2000s and the tech bubble.

2007-2010, The great recession: The 2010 completion of the tallest building in the world, the 2,717-foot Burj Khalifa, Dubai, coincided with the current global financial crisis.

So is this information reliable? When investing you have to take into account many factors, but I firmly believe trusting just “one” indicator, like the Skyscraper Index, is foolish. But there does seem to be an undeniable trend between the completion of skyscrapers and economic misfortune around the globe.

Investors look at everything from macro indicators like inflation, unemployment and GDP growth, to more bizarre ones like the diaper-rash indicator and the hemline index to measure the health of the economy.

Should we hold our breaths as the next world’s tallest skyscraper is built? Well, looking to China where 53 per cent of the world skyscrapers currently under construction are, and India where 14 new skyscrapers are currently underway; the economic prosperity in those regions don’t look set to falter any time soon.

David Mayes MBA lives in Phuket and provides wealth management services to expatriates around the globe, specializing in UK pension transfers. He can be reached at 085-335-8573 or [email protected].

— Anthony Lyman



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Phuket hotel watch – 3 months down, 9 to go in 2019

Bill Barnett

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Phuket hotel watch – 3 months down, 9 to go in 2019 | The Thaiger

by Bill Barnett of C9Hotelworks.com

At the beginning of the year Phuket’s tourism and hotel sector was cautiously optimistic after a strong first half of 2018 and humbling second half. Key terms that kept popping up were Mainland Chinese, Thai Baht Appreciation, Elections and Supply Concerns.

So today, with three months of performance under the belt in 2019 what are the key trends in hotel trading? These can best be compressed in the following points –

According to data from hotel benchmarking group STR, Thailand remains Southeast Asia’s leading destination for Mainland Chinese, but the gloss is being diminished by Vietnam’s meteoric rise, and strong numbers by the Philippines and Cambodia.

Market-wide RevPar shunk by 0.04% in 2018 and flat demand at the onset of the year is now shifting into negative territory moving into February and beyond. Turning back to last year, group demand is falling which is as key concern in a wholesale driven marketplace.

One stark positive is that RevPar is being propped up by rates and not occupancy. A key takeaway is that in peak and high season, Phuket hotels are able to drive rates up in key periods and continue to do so. This of course is a broad trend.  Good hotels tend to perform at higher levels, while poorly managed ones remain subpar.

Getting beyond the numbers, as I speak to hoteliers the expectation is that wholesalers remain a critical component of the island’s hotel industry and despite the expected shift with technology to more direct bookings, the reality is that wholesale models are sensitive to demand volatility and the result of this feeding frenzy most often will be either flat rates for the year or in some cases a retraction.

We expect the remainder of 2019 to be challenging. Some hotels will look at this as an opportunity to reposition, renovate or cut costs. While others will look at new segments, niche offerings or emerging markets like India to regain momentum.

As for the top critical issues facing Phuket hotels, in my opinion these can be distilled in the following Top 3 Things Keep Me Awake at Night…

• Mainland Chinese – If tourism players or hotels believe the damage to Brand Phuket is over, think again. Talking to key tour operators there remains a hangover from last year’s boat sinking incident and travellers remain keenly concerned over safety. Only time and more concentrated promotion will see a return of the numbers.

• Growing Supply and Demand Imbalance – The current pipeline is just over 8,000 keys in development on the island. What’s more concerning is that projects in planning are not represented in this metric, and by our estimate there are approximately 5,000 more keys in planning. While both the pipeline and planning numbers will see some wash, the sum total exceeds current and forecasted demand.

Moreso, the rise of unlicensed condominiums, apartments, houses and villas is continuing unabated and is further exacerbating supply issues. Every time you see a group of tourists renting a 3 or 4 bedroom villa, that’s three or four hotel rooms that lay empty. Government control of unlicensed properties is a key issue facing Phuket’s tourism industry.

• Diminished Natural Resources and Strained Infrastructure – Water tops the list and there is little doubt we are reaching the tipping point with mounting shortages and soaring demand. Electricity is another concern. Lastly is a rising number of vehicles on the road, a urbanising trajectory and slow development of roads and public transport.

To these point’s lets revisit the hotel development pipeline and reflect that a island long term master plan, zoning for new tourism expansion and requirements for developers to invest in public infrastructure to obtain operating licenses is sorely lacking. Something has to give on this front.

In conclusion am I pessimistic about Phuket’s tourism and hotel future in 2019 and beyond? Absolutely not, direct airlinks are growing and the island has a well-structured capacity for handling tourism, but I firmly believe looking into our problems, discussing and finding ways to resolve these are critical to a sustainable growth pattern.

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‘Seastead’ set up off coast of Phuket

The Thaiger

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‘Seastead’ set up off coast of Phuket | The Thaiger

PHOTOS: Nation TV

A Thai couple has successfully set up a ‘Seastead’ near Phuket.

Seasteading is aiming to build floating societies with “significant political autonomy”. Nearly half the world’s surface is unclaimed by any nation-state, and many coastal nations can legislate “seasteads” in their territorial waters (like a “homestead” but wetter).

The nation TV reports that website ‘Bitcoin.com’ and ‘Ocean.builders’ report that the Thai couple Chad Elwartowski and Nadia Summergirl are are the first seasteaders who established a small seastead 12 nautical miles off Phuket.

Most of the construction of the Seasteading was built on the island of Phuket. The installation in the sea started on January 9.

Mr Elwartowski reveals that the reason that they have chosen to settle near Phuket as the construction price is cheap. The sea is suitable for the establishment as waves are not too high and can attract many tourists.

SOURCE: Nation TV

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Massive 11 hotel project, surf club and waterpark for Kata, Phuket

Bill Barnett

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Massive 11 hotel project, surf club and waterpark for Kata, Phuket | The Thaiger

by Bill Barnett, C9Hotelworks.com

Thai developer K.W. Plaza group has unveiled plans for a large-scale mixed-use project called The Beach Plaza on 15 rai, that will have 11 three and four star hotels with a total of 1.490 rooms. The developer is already pitching the unconstructed project to global hotel interests for an imminent sale.

The properties will have varying room sizes from 25 to 35 square metres and range in size from 78 to 204 rooms. Part of the development scheme will see the hotels individually sold off to hotel investors and/or operators.

Late last year the group built and sold the Surf Resort in Patong which was brokered by JLL to a Singapore-based owner/operator.

Other components of the project include a surf club, waterpark, and freestanding restaurants and retail.

An initial hotel has already obtained EIA approval and is currently for sale, with construction of other properties to be phased. The Beach Plaza is off-beach, behind the Kata Night Market and close to Club Med, Ozo and the Ibis.

For more details on the project click HERE.

Massive 11 hotel project, surf club and waterpark for Kata, Phuket | News by The Thaiger Massive 11 hotel project, surf club and waterpark for Kata, Phuket | News by The Thaiger

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